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Preparing Financial Projections and Pro Forma Statements

It is critical to your business success thattechnological growth has changed many
you prepare realistic forecasts of yourbusinesses and even eliminated some. Also, a
future business performance. You need tomanufacturing company must have a reliable
forecast your operations for three to fivesource of raw materials, and the future cost
years in order to guide your business growth.of raw materials must be considered.Projected
You will need realistic forecasts to supportFinancial  Statement
your business plan if you need a loan or
investor funds. The elements of andThe pro forma financial statements will
influences on pro forma statementsinclude estimated future sales, expenses, and
include:Prior  Financial  Statementsprofits. These items need to be broken down
in order to be meaningful. The sales
Of course you will have to use previousestimates should state which salesperson,
financial statements if your business haswhich department, or which region will
been operating for some time. From yourgenerate the sales. The estimated expenses
prior financial statements, you will usemust be broken down into general and
sales and revenue levels, business ratios,administrative, operating expenses,
average expenses, and any relevantdepreciation, and taxes.All of your estimates
information about your accounts receivable orand projections must logically flow from
payable. You should expect your priorprevious years' financial statements. If you
financial statements to show financialare a start-up business, you may not have
improvement for each year ofprofits for the first year or two. You
operation.Internal  Factorsshould start to show profit by the third year
and your profits should continue to grow
That status of your operations is importantexcept for occasional large expenses. Your
in preparing pro forma statements andpro forma statements must include estimates
projections. For example, you must considerof any large expenses that will affect your
whether your business needs to relocate dueprofit such as relocating, property damage,
to expansion, or your business needs to buyor a new marketing campaign. Unless you have
expensive new equipment to replace oldera background in accounting or finance, you
models. You also must consider yourwill need a professional's help.Jo Ann Joy,
competition, how you are measuring up toEsq., MBA, CEOThe future of your business
them, and whether you need a new marketingstarts here!You may contact Jo Ann by phone
plan to be more competitive. Also, considerat (602) 663-7007, by fax at (602) 324-7582,
whether your company needs additionalby email at joannjoy@Indigo Business
personnel or additional training.ExternalSolutions.net, and by mail at 2313 East
FactorsOcotillo Rd., Phoenix, AZ 85016. Copies of
any articles will be provided free of
The status of the country's economy is verycharge.For more information about these and
relevant to your company's future. Certainother important legal and business topics,
businesses may be affected by the status ofand for free articles, please visit our
the global economy. It is important towebsite at Copyright 2006. All rights
understand the industry trends to be certainreserved. Indigo Business Solutions is a
that your product or services will continueregistered trade name.Discover the secrets to
to be marketable. The amazing pace ofsuccess.



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